When a client pays you net of withholding tax
Why Nigerian and Kenyan clients pay consultancy invoices short, the withholding rates on professional fees, and how to record and evidence the gap.
By Achekam · · 4 min read · For Consulting businesses in Nigeria, Kenya
You invoice a client for consulting work and the money that arrives is short. Not by a random amount, but by a round percentage of the fee. In Nigeria and Kenya that is usually withholding tax. The client has kept back part of your fee, and is supposed to pay it over to the tax authority in your name, where it becomes a credit against your own tax.
In principle that is fine. In practice it is a bookkeeping problem, because the invoice is still open for the withheld part, and the credit is only worth something if you can prove the client paid it over.
Why the client pays less than the invoice
Withholding tax moves part of the collection of your income tax to your client. When a client in Nigeria or Kenya pays a professional fee, it deducts tax at the withholding rate, pays you the net amount, and remits what it withheld to the authority. Done properly, you can later set the withheld amount against your own tax.
So a short payment of this kind is not a dispute. It is one payment in two parts: cash to you, and tax to the authority on your behalf.
In words: a resident client in Kenya receives your invoice for a professional fee. It pays you the fee less 5%, and pays that 5% to KRA in your name by the 20th of the next month. Your bank statement shows the net amount; your receivables still show the full invoice; and the missing 5% lives, for the moment, only in the client's records and KRA's.
Withholding rates on professional fees in Nigeria and Kenya
At the time of writing:
| Resident recipient | Non-resident recipient | |
|---|---|---|
| Nigeria: commission, consultancy, technical, management and professional fees | 5% | 10% |
| Kenya: management, professional and training fees | 5% | 20% |
In Kenya, contractual fees are taxed at 3% for residents and 20% for non-residents. Rates and categories change, and the right category for a given engagement is not always obvious, so check the current position in PwC's Nigeria withholding tax summary and PwC's Kenya withholding tax summary, and confirm with the NRS or KRA where it matters.
When the client must pay it over
The client's duty does not end with deducting the tax. In Nigeria, withholding tax not remitted to the NRS by the 21st of the following month attracts 10% a year plus interest, and failing to deduct it at all attracts a 40% penalty; see the Nigeria Tax Administration Act 2025, sections 105 and 107. In Kenya, withholding tax is remitted by the 20th of the following month.
The penalties fall on the client, but the consequences reach you. Withholding that was never remitted is hard to use as a credit. And in Kenya, from 1 January 2026, KRA checks declared income and expenses against eTIMS, withholding tax and customs data, so the withholding your clients report against your name should line up with the income you declare.
What the receipt screens cannot settle today
Achekam records customer payments against one invoice or spread across several of a customer's invoices, and a part payment leaves the invoice part-paid. What the receipt screens cannot do today is settle the withheld part of an invoice. There is no way on those screens to mark the difference as tax withheld by the client.
Until that changes, a workable routine is:
- Record the cash you actually received as a receipt against the invoice. The invoice becomes part-paid.
- Leave the withheld amount open on the invoice.
- Keep your own list of invoices with withholding outstanding: the invoice, the gross fee, the cash received, the amount withheld and the client's evidence.
- Ask your accountant how to clear those balances in the books once you hold the evidence, so that the amount owed by the client is replaced by the tax credit it really is.
Because those balances stay open, they appear in the age analysis, which groups receivables into 0-30, 31-60, 61-90, 91-120 and over 120 days. That is uncomfortable, but it is also useful: withholding balances cannot be quietly forgotten while they sit there.
Keeping the withholding evidence
Your credit depends on proof that the tax was deducted and paid over in your name. For every short payment:
- note the invoice, the gross fee, the cash received and the amount withheld;
- ask the client for its proof of deduction and remittance as soon as the payment arrives;
- check that your name and tax identifier are correct on it;
- file it with the invoice, in the client's folder.
Do this payment by payment. Trying to collect a year's proofs at year end, from clients whose finance staff have since changed, is where credits are lost.
Following up withholding the client has not remitted
When a client cannot produce evidence, start with a polite request listing the invoices concerned and the amounts withheld. If nothing comes, raise it with someone more senior at the client, and keep a record of every request and reply.
Talk to your tax adviser about withholding you cannot evidence: whether to keep pursuing the client, and how an unrecovered amount should be treated. The bookkeeping cannot settle that question. What it can do is make sure no withheld amount slips out of sight before the question is asked.
For how open balances show up in the partners' monthly figures, see a monthly management pack for partners.
Go through last quarter's receipts, list every short payment, and ask each client for its proof of withholding now, while the people who made the payments are still there to answer.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
